Felix Salmon brings Us this Post which should be read. The major theme of the comment states that the major Players are trapped inside their self-created financial instruments, and cannot find Anyone to unload the Paper on. They cannot unload because they can’t and won’t establish a clear value for the assets involved; facing a high magnitude of asset-value loss if presenting a clear financial worth, lacking Buyers if they do not. No one, it seems, wants to bite the bullet!
The real Problem resides in the fact that these Things (they do remind of the Movie) have expenses of processing, and Investors are charged with these Processing Costs. Few can actually inform as to the true value of these Instruments, but can easily stipulate the high Cost of their maintenance. Nobody functionally wants any part of them. Gillian Tett and Felix both want to call in the Bottom Feeders–Those who make a business of buying up bad Paper for far less than nominal value; making their Profits in the Recovery of the residual. The later Group, though, must be able to find a nominal value for Assets, before they can set a Recovery purchase price. It is unlikely Bottom Feeders will intervene, they insist on some resident value to begin with; a quite uncertain element with these Instruments.
All elements of the Post resound with the fear that the Markets will freeze, if some Recovery is not devised for the mess. I personally find no great terror in the Prospect of the Market freeze. The Markets have been too volatile in Recent years, and with over-reactive Gain for minutiae events; all on the Account of Hedge Fund manipulations. It amuses me that the Hedge Funds are deeply invested in these Instruments, as a touted Means to rapid Profits-Taking. It may well be Time for Hedge Funds and the Securities-issuing agencies to register deep losses. lgl
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